Dishonour of Cheques-Vicarious liability of Directors

The Hon’ble Supreme Court in a matter dealt with the issue of vicarious liability of Directors in the offence of dishonour of cheque.

The Hon’ble Supreme Court in a matter dealt with the issue of vicarious liability of Directors in the offence of dishonour of cheque. It was held: • In the case of offence by Company, to bring its Directors within the mischief of Section 138 of the Act, it is necessary to allege in complaint that they were in charge of and responsible to the conduct of the business of the Company. • The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. • For fastening the criminal liability, there is no presumption that every Director knows about the transaction. • Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company. • Vicarious liability can be inferred against a company registered or incorporated under the Companies Act only if the requisite statements, required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments that the accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with. • Vicarious liability on the part of a person must be pleaded and proved and not inferred. • If the accused is a Managing Director or a Joint Managing Director, it is not necessary to make specific averments in the complaint. By virtue of their position they are liable to be proceeded with. • If the accused is a Director or an officer of a company who has signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint. • The person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases. [A.K. Singhania vs. Gujarat State Fertilizer Co. Ltd. & Anr. ] (SC, 17.10.2013)